What is the Best Life Insurance for Me?

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Answered by: Melinda, An Expert in the Life Insurance and Annuities Category
The best life insurance for you depends on a number of factors.

First, you should consider what you want the life insurance to do. Life insurance can be used for a number of purposes, including paying off outstanding debts (personal and business), paying off a mortgage, and taking care of your final expenses. Take an honest look at your present financial situation. If something were to happen unexpectedly, how would that effect your loved ones? If you’re married with children, for example, you might want to leave enough to pay off the mortgage and pay for their college fund. If you’re single, you might want to leave enough to cover final expenses.

Once you’ve determined what you want the life insurance to cover, figure out how much you need. Try to cover all the bases—college funds, mortgage costs, outstanding debts that would need to be repaid, and final expenses. Once you know how much you need, you can begin to look at what type is the best life insurance for you.

There are three basic types of life insurance: term insurance, whole life insurance, and universal life insurance.

Term insurance is just what it sounds like. You pay insurance premiums for a given term, or set amount of time, and you have insurance coverage during that time. Once the term ends, the insurance ends. Some policies do include an option to renew, but it will be at a higher premium. Term insurance is typically the cheapest form of insurance because it has the lowest risk for the insurance company. Term insurance is perfect for covering short-term needs such as paying for your children’s college education or a mortgage. These expenses come to an end, and your insurance can end when the expenses do. Term periods vary, and can range from five years to 20 years or more. The longer the term and the higher the amount, the higher your premium will be.

Whole life insurance is sometimes referred to as “permanent” insurance. Whole life is designed to be in place for your lifetime. It accumulates cash value, and if you choose to end the policy, you can receive the cash value. The premiums remain the same throughout the life of the policy. Policies will usually endow, or end, at age 95 or 100, which is when the cash value is equal to the amount of the insurance you take out. Whole life insurance is excellent for final expense coverage, or if you want to leave an inheritance to an individual or charity.

Universal life insurance is a mixture of other two policies. There is a minimum amount to pay, and if you just pay the minimum, it functions like a term policy. If you pay more than the minimum, it accumulates cash value. Depending on the type of policy, the cash value may grow with a set interest rate, or it may grow based on gains in the stock market. You can end the policy and receive the cash value or stop paying and let the cash value pay your premiums until the policy runs out. Universal life is flexible, so it’s suitable if you’re uncertain of what your financial situation might be in the future.

The policy premiums are based on your age, your gender, and your health. Bigger policies have more requirements about health because they’re a bigger risk to the insurance company. If you’re young and in good health, term life insurance is a good choice. The premiums are low, and you can get a larger amount of coverage. Typically, if you’re older and have some health challenges, you may not qualify for a term policy. You’re best bet may be a whole life policy. Be sure to read the fine print, though, as many policies for seniors don’t offer the full value of the policy until you’ve had it for two years.

The right life insurance for you depends on what you can afford in insurance premiums, your age and health, and what you need the life insurance to cover. Take into consideration the coverage you get from your employer, and then supplement that with a policy, or policies, that meet your needs. Get multiple quotes from highly rated companies to determine the best policy for you.

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